Lofts 29: Places in the Heart

Seeing a building – one that
has long stood vacant – get a facelift breathes new life into a community. To
see it transformed into a vital component of a city center is cause for
celebration.

Built in the 1920s, what most remember as the Heilig-Meyers
furniture store at the corner of Cabarrus Avenue and Church Street is now Lofts
29: home to residential tenants already occupying more than half of the
recently-completed 26 apartments.

Widespread deterioration of the 29,898-square-foot three-story
structure had most likely meant eventual razing, giving way to a vacant
.3566-acre lot that was worth more ($140,000) empty than with the building on
it (less than $0). That’s because its owner – the City of Concord – would have
had to spend $160,000-plus to get the building torn down.

Nearly a decade of trying to find a buyer or come up with a
viable plan for the site yielded a possible Walgreens, but that never came to
fruition. Then, in February 2014, Concord City Council voted to initiate the
bidding process that saw Special Purpose Entity – a joint venture between
investors with CommunitySmith, LLC (Managing Partner Holten Wilkerson) and
Rehab Development Inc. – buy the property from the City for $1; the sale closed
at the end of July 2014.

Joining them in the venture is Level 2 Development, a real
estate development firm based in Washington, DC. They are 27 percent equity
partners in Lofts 29.

“Level 2 is thrilled to be investing in Cabarrus County and to
play just a tiny role in the great work being done in downtown Concord,” Jeff
Blum, principal and co-founder of Level 2 Development, says. “The city is
already amenity rich with restaurants and a thriving music scene. We know that
residents of Lofts 29 will enjoy a fabulous, walkable lifestyle that is the
envy of many large and small towns alike.”

Rehab Development Inc. is the brainchild of Ed Lipsky, president
of Rehab Builders, and Flay Blalock, co-founder of Rehab Engineering, as well
as Patrick Reilly and Josh Lipsky. Based in Winston-Salem and founded in 2008,
the design-build-development company currently concentrates on Main Street
projects in the Carolinas, Virginia and Georgia.

Patrick Reilly, President, Rehab Development

But how does Rehab Development find dilapidated buildings in
need of some major TLC? “It’s always different (in each case),” Patrick Reilly,
president of Rehab Development, says. “People contact me or refer me; sometimes
the municipality contacts me. We respond to RFPs (Requests for Proposals).
Someone had shared a packet of available Concord properties with me...we stumbled
across it.”

That packet prompted Reilly and his team to visit Concord and
tour the available real estate in 2013.

“We came in and walked through all the
buildings, the hotel, the theatre,” he says. “We actually looked at the Loft
building last. This is a great building, but there’s not a dedicated parking
lot. Project parking is always an issue.”

Not to put the cart before the horse, there were other issues to
the acquisition and restoration of the property besides parking. Having been
built more than 50 years ago, the Heilig-Meyers building is listed on the
National Register of Historic places and sits in the Union Street North -
Cabarrus Avenue Commercial Historic District. That means several things.

While there had been a Historic Tax Credit program in place upon
the purchase of the site, the North Carolina Legislature discontinued the
program at the end of 2014. Rehab Development was able to qualify for tax
credits for the duration of that year – resulting in a $100,000 savings – but
that figure could have been closer to $500,000 with the continuation of
credits. Historic preservation grants and two grants approved by Concord City
Council helped defray more of the cost.

In addition, the renovation had to follow the guidelines set by
the National Park Service – the governing body of the National Historic Tax
Credit – and the North Carolina State Historic Preservation Office.

“You might not be able to
do everything you want to and you may have to do things you didn’t expect, but
it’s more of an asset because the end-product is a little nicer,” Reilly says.

Reilly refers to the replacement of all the beadboard ceilings,
which were original to the building but were initially planned only for the
hallways. Additionally, “There were a lot of structural repairs, a lot of rot
in there. You have to stabilize the building first so it’s safe to work. The
roof was next. We shored up the exterior brick around the new windows. The
water pressure wasn’t quite as good as we expected; that dictated what type of
sprinkler system we needed to install. And the depth of the common area took a
couple of parking spaces,” Reilly adds.

The ground floor common area is a definite perk. Besides a
stocked fitness room, tenants will enjoy a lounge that also reflects the
character of the building. The original staircase to the second floor remains
intact, Rehab Development constructed a bar from reclaimed lumber (that
continues along the back wall) and other materials from previous jobs, and the
room will be completed with furniture and a big-screen TV.

Behind the common area, Rehab Development fabricated a parking
garage, an additional $75 per month. Numbered storage closets face each space
and an elevator is located in the rear of the building.

“There are more spaces outside, but not quite as many as there
are apartments. Tenants will need to park elsewhere,” Reilly explains, alluding
to ample after-hours downtown parking.

As for the number and layout of apartment units, “The building
was basically a blank canvas; the windows dictated. I basically went under the
premise that each of those windows on the side had an apartment of its own,”
Reilly says. “You model all that, get a schematic on paper with as many units
as you can to get the highest rent per square foot and generate as much revenue
as possible. There are one-bedrooms sprinkled with a few two-bedrooms (at the
front). There’s one dedicated studio. Maybe we’ll do a commercial space
downstairs.

“We were able to demo almost all the walls, but the walls on the
third floor were never covered. That meant we could leave exposed brick in
there.” (The National Park Service requires any brick walls that had been
plastered be sheet-rocked.)

“Floors were patched where rot once existed, so it’s evident
that there are two different floors. But historic restoration works that way,”
Reilly says.

The 26 units are all-inclusive: water, electricity, trash
removal, basic cable and wi-fi are included in the rent, which ranges from $755
to $1,195. The one- and two-bedrooms range in size from 560 to 909 square feet.

Sarah Morrison and Lori Love are property managers and realtors/brokers
with MB Property Management. Known as the Love/Morrison Team, they’re handling
leasing the apartments at Lofts 29. Even during construction, there’s been no
shortage of interested parties who could obviously see beyond the blank slate.

“We have shown the lofts at least 40 times,” Morrison says. “We
are currently at a one-half occupancy rate and these commitments were made
during construction. We believe with construction completion in sight, we will
see the remaining units lease quickly.”

And Reilly says there is almost no typical renter. “It’s a very
diverse building. We have a few empty-nesters, but it’s whoever wants to live
in that type of apartment. It’s downtown, it’s situated well for people without
children,” he says.

“There has been good diversity in interest thus far,” Morrison
adds. ”Young professionals, single folks, and even people who are at the point
in their lives to downsize have shown good interest. The location is excellent,
and prospective tenants are excited to walk to restaurants and shopping in
downtown. The greenway is a wonderful perk, too.”

Rehab Development will remain owner/manager of Lofts 29 after
its completion. Maintenance staff has been hired and the Love/Morrison Team
will continue to act as leasing agents.

As with most construction
projects, completion was delayed for unforeseen reasons. A Certificate of
Occupancy was awarded on December 7, and many tenants were eager to get moved
in right away.

“We’re giving our first renters a move-in package that includes
downtown dollars. It’s to say thanks for being patient through delays, and it
keeps it local,” Reilly shares.

And that’s at the heart of what Rehab Development does…renewing
older city centers, building by building. “We’ve taken a building that had once
been a proud part of a downtown area, had not been utilized in several years
and would continue to be a blight to the area. We totally turned that around.
It provides, in this case, the first critical mass to the downtown area,”
Reilly says.

Reilly is also quick to point out that the Lofts 29 deal would
not have gone nearly as smoothly without Diane Young, executive director of
Concord Downtown Development Corp (CDDC). “The CDDC began a proactive effort to
find the right developer for the Hotel Concord block in the fall of 2013,”
Young says. “We began by looking at boutique hotels that had a similar ‘small
room’ configuration to see how they made this work. Through this process we
were introduced to Patrick Reilly, and after walking through the properties in
this block that make up the larger project, he became extremely interested in
the former Heilig-Meyers building, now Lofts 29.

“We are thrilled to have our first large infusion of downtown
residential loft apartments be an example of high-quality workmanship and
rental rates that will set the bar high for other projects to follow. We are
starting out of the gate with a project we can all be proud of, and one that
will contribute annually over an estimated $270,000 to the Downtown Concord
businesses through purchases of goods and services.”

The North Carolina Main Street project released an economic
impact report that mirrors what’s being done in downtown Concord. According to
Sharon Decker, NC secretary of commerce, “Since North Carolina began its Main
Street project in 1980, over $2 billion has been invested in Main Street
districts, over half of which has come from the private sector. There has been
a net gain of more than 18,000 net new jobs and 4,700 net new businesses.”

The report also refers to upper-floor housing, saying, “If a
vacant storefront is a drain on the downtown economy, there is one strategy
that can have a sizable positive impact: downtown upper-floor housing. This
strategy is emerging as a major opportunity in North Carolina communities, with
over half of towns already reporting downtown housing. In most communities, the
range of rents is $400 to $800 per month, with some locations commanding up to
$1,200 per month.”

“It’s labor intensive, but creates more jobs and creates taxes,”
Reilly adds. He also has his eye on another downtown project: The Hotel Concord
and adjacent former bank building.

Rehab Development envisions “34 apartments in the hotel building
and four in the bank building. We’re trying to find an anchor tenant to take the
(bank) space. We have one potential right now,” Reilly shares.

“I’ve been in the
building a lot. That’s how I can come up with hard numbers. We’ve also had our
environmental guy in there. We know we’d be using the existing walls, but
combining rooms to create mostly one-bedroom apartments and some two-bedroom.
We would try to maintain the current social activities in the hotel, have
tenants utilize the back entrance so traffic doesn’t interfere with activities
going on in the front.”

The Hotel Concord building is owned by two entities: Fifth Third
Bank and Union Street Corp. And while Reilly is optimistic about this project,
it’s currently in the discussion phase and no agreements have been made as of
this writing.

One reason this project seems so enticing to Rehab Development
is the reinstatement of the Historic Tax Credit. Local and state governmental
leaders worked hard in 2015 to restore the program, which went back into effect
on January 1. Projects that qualify as rehabilitation of income-producing historic
properties can receive a 20 percent federal income tax credit.

So what was once debt for the City of Concord is now worth some
$2.3 million and is a true indicator of what the historic downtown district can
aspire to be. Hopes are high that Lofts 29 is just the first.